Monthly Archives: March 2010


Taxpayers deserve sensible free marketplace (James M Stone)

In the 19 March 2010 issue of the Boston Globe, James Stone (former Chair of the Commodities Futures Trading Commission and CEO of Plymouth Rock Assurance) wrote a thoughtful column on reforms to our financial system: Taxpayers deserve sensible free marketplace. It follows along lines similar to those of former Federal Reserve Chairman Paul Volcker and MIT Professor Simon Johnson (co-author of BaselineScenario).

[N.B. – Boston Globe articles sometime suffer from “link rot” so read it while it is still available for free.]

-RichardH


Leonhardt-The Perils of Pay Less, Get More

Something to keep in the back of our collective minds as we (eventually) emerge from the current economic and employment crisis.

In his 16 March 2010 NY Times article, The Perils of Pay Less, Get More, Leonhardt writes:

As a society gets richer, its tax rates tend to rise.
This idea is known as Wagner’s Law, named for the 19th-century economist who came up with it. Citizens of richer societies generally prefer more government services, Adolf Wagner explained. With their basic needs met, they want a military to protect them, good schools for their children, comfortable retirement for the elderly, medical care even when it isn’t profitable and a strong social safety net.
Sure enough, the United States followed this path for most of the last century. In 1900, federal taxes amounted to just 2 percent of gross domestic product. By 2000, the share had risen to 21 percent.
Over the last couple of decades, though, we have repealed Wagner’s Law — or, more to the point, only partly repealed it. Taxes are no longer rising. They fell to 18 percent of G.D.P. in 2008 and, because of the recession, to a 60-year low of 15.1 percent last year.
Yet our desire for government services just keeps growing. We added a prescription drug benefit to Medicare. Farm subsidies are sacrosanct. Social Security is the third rail of politics.
This disconnect is, far and away, the main reason for our huge budget problems.

(…)

What needs to happen? Spending will need to be cut, and taxes will need to rise. They won’t need to rise just on households making more than $250,000, as Mr. Obama has suggested. They will probably need to rise on your household, however much you make.

Read on and also take a look at his follow-on piece, The Future of the Deficit.

But, as I said at the beginning, let’s fix the current employment crisis first.

-RichardH


Catholic opposition to health bill fades (Boston Globe)

In the 18 March 2010 issue, The Boston Globe reports Catholic opposition to health bill fades.

Roman Catholic opposition to the health care overhaul package is crumbling, with some church officials and lawmakers concluding that their long-sought goal of health care overhaul trumps the desire to adopt the severest restrictions on abortion funding.

A coalition of 59,000 nuns released a letter yesterday calling on Congress to approve the overhaul, defying the US Conference of Catholic Bishops, which opposes the measure. The Catholic Health Association, which represents 1,200 Catholic hospitals, has endorsed the package, as have Catholics United and Catholic groups promoting social justice.

-RichardH


Author’s Response to Social Insecurity – Investment Rules Need Rethinking

I solicited a response to my post Social Insecurity – Investment Rules Need Rethinking from Arun Muralidhar a co-author of the book that I mentioned, Rethinking Pension Reform, by Franco Modigliani and Arun Muralidhar, Published October 2004.

I posted it as a comment to that other item, but RichardH urged me to make it more prominent.

Here is what Arun Muralidhar gave me permission to post:

I think the privatization folks have realized that privatization is a pipe dream (especially given that even the Chileans have reformed their system away from privatization) and the market collapse of 2008 demonstrates how individuals who were unlucky to be conceived in the wrong year and month could have been left in poverty at retirement if they were in DC plans. Also, the folks who support no change to current way of financing benefits have got to realize that a PAYGO system is unsustainable and leaves SS contributions very susceptible to small changes in population and productivity growth. The simple solution is to implement what we call “risk sharing through a common portfolio.” Because of continued inaction in Washington year after year (and squandered surpluses), there is a cost to be borne and it is currently a 1.1% permanent increase in SS taxes for all citizens – the worse part, if we keep delaying, the cost keeps rising as this is a ticking time bomb, but the fuse is long so Washington can kick the ball down the road to the next set of representatives!

The sad part is Congress is totally paralyzed (I tried contacting my rep, Congressman Rush Holt, when I lived in NJ and he claimed he did not have the time to meet and I was fobbed off onto a researcher). Someday, I hope that our elected representatives get a backbone to take this on and not strap our kids with a ridiculous tab for our inaction.

In addition to having a decent health care system, shouldn’t we ensure that we do not leave our retirees in poverty or plunder from our children to prevent such an outcome?


Health Reform in No Uncertain Terms


That’s why we need health insurance reform right now

When you hear people more worried about the politics of it than what’s right and what’s wrong…

Follow this link to the page where you can record the results of your call to your Congress people

With just days remaining, the final vote is shaping up to be extremely close. Everything we’ve worked for is on the line, and your voice is needed now more than ever before.


Social Insecurity – Investment Rules Need Rethinking 1

Follow this link to the editorial in the Worcester T & G.

I posted this response to this Editorial as a comment on the web site:

Wow, I cannot believe that I am seeing this as a T & G editorial. I have been advocating this since at least 2004.

Read the book – Rethinking Pension Reform, Franco Modigliani, Arun Muralidhar, Published October 2004.

http://www.cambridge.org/uk/catalogue/catalogue.asp?isbn=0521834112

It spells out a well thought out plan to modify Social Security investment policy in ways indicated by this editorial.

Imagine if Social Security had been allowed to invest at the depths of the market in March 2009. That investment by Social Security would already be up by 60% or more.

Previous publications by Modigliani and Muralidhar show even more detail than in the book. They had an FAQ that showed how they resolved just about every possible objection to their plan. Ted Kennedy was going to have them testify before Congress, but I don’t think that ever actually happened.

Follow this link to what I posted back in 2004 about this topic.


Have You Sent Your Letter To Congress?

http://my.barackobama.com/DaySix6

With everything on the line and so little time left, we have to bring our voice to Congress through every possible channel.

It takes just a few minutes to write and send your own letter directly to your representative to let them know that you support health reform.

I have made phone calls, sent email, and written on my Representative’s facebook page.

Don’t miss an opportunity to make your voice heard.


U.S. Anger Over East Jerusalem Row Is Excessive

Follow this link to the story in the Israeli newspaper, Haaretz.

This gives the other point of view to my previous post, A Serial Obstructionist.

As with all issues in Israel, I don’t know which side to believe.  Of course that’s no different from political issues in this country.  Sometimes it is hard to know who to believe.

Of course the Haaretz article doesn’t take into account the political problem faced by President Obama.  The Palestinians may be taking advantage of the Obama administration’s seeming anger over the Jerusalem row.  However, the Palestinians may be taking advantage of Netanyahu’s demonstration that you can walk all over the Obama administration and they will be powerless to do anything about it.

It is not clear to me which position that Obama could take that would be more harmful to Israel in the end. Netanyahu has made his political calculation to do what he has done.  Time will tell who is the better political calculator, Abbas, Netanyahu, or Obama.

As for the analysis in Haaretz, I would hardly call Obama’s attempts to strengthen sanctions on Iran, extending a hand to Iran, unless you mean by hand a closed fist.